May 23, 2023 Latest on debt ceiling negotiations

By Mike Hayes, Maureen Chowdhury, Tori B. Powell and Elise Hammond, CNN

Updated 9:29 p.m. ET, May 23, 2023
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3:19 p.m. ET, May 23, 2023

Short-term debt limit has '"technical challenges," GOP negotiator says

From CNN's Alayna Treene

Rep. Patrick McHenry speaks with reporters on Capitol Hill in Washington DC, on May 23.
Rep. Patrick McHenry speaks with reporters on Capitol Hill in Washington DC, on May 23. Francis Chung/Politico/AP

Key GOP negotiator Patrick McHenry refused to say whether the White House and Republicans have discussed a short-term bill to raise or suspend the debt limit in the event a deal cannot be reached by the deadline for a potential government default. He argued, however, that there are "technical challenges" to doing that.

The North Carolina Republican, who serves as chair of the House Financial Services committee, also would not say whether such a move is off the table, but told reporters, "The treasuries market is quite different, and our technical ability to do a short bridge is quite limited."  

McHenry said the main sticking point in debt limit negotiations continues to center on spending cuts, calling it "a fundamental disagreement between the two parties."

He also argued that House Speaker Kevin McCarthy and President Joe Biden have built a "productive" relationship over the course of negotiations, and he thinks the talks should be left to the two of them to hash out.

"What I saw in the Oval Office yesterday was a willingness to engage with each other in a sincere way, air disagreements, listen," he said. "And I think that was productive."

McHenry told reporters the key disagreements they're still working out, apart from spending cuts, are on work requirements, taxes and pharma.

3:01 p.m. ET, May 23, 2023

US default might result in more Treasury purchases, new report says

From CNN's Bryan Mena

If the United States defaults on its debt, that would raise questions about the safety and viability of US Treasuries. However, an analysis released by the Atlantic Council on Tuesday says investors may actually buy more US Treasuries.

That's because there isn't any viable alternative.

The Atlantic Council's analysis argues that other government securities markets aren't large enough to provide a safe haven for investors.

“There simply are not enough safe assets available for investors to move off of Treasuries. This is one reason why flirting with a default is so maddening," Josh Lipsky, senior director at the Atlantic Council's GeoEconomics Center, wrote in a release. "The US government issues something the rest of the world desperately wishes it had.”

The amount of outstanding US Treasuries exceeded $25 trillion in the third quarter last year, a government securities market about as large as those of the rest of the G7 countries and China combined.

In the event of a US default, Treasury Secretary Janet Yellen might be able to calm investors of Treasuries "by promising to continue to pay interest on debt even as other bills go unpaid," Lipsky wrote.

But that would not be a solution at all, he added.

3:29 p.m. ET, May 23, 2023

Debt ceiling negotiators will continue to meet throughout Tuesday, Graves says

From CNN's Morgan Rimmer and Lauren Fox

Rep. Garret Graves, center, speaks to reporters about debit ceiling negotiations in Washington DC, on May 23.
Rep. Garret Graves, center, speaks to reporters about debit ceiling negotiations in Washington DC, on May 23. Bill Clark/CQ-Roll Call, Inc/Getty Images

Republican Rep. Garret Graves, who has served as a chief negotiator during debt ceiling talks, said meetings will continue with the White House team throughout the day.

He added that no scheduled meetings have been set between President Joe Biden and House Speaker Kevin McCarthy. 

“I have a feeling we're going to be meeting most of the day. Whether we make progress or not, I can't say, but I think we're going to be meeting most of the day,” he told CNN.

But, he says, large differences remain, even as the timeline grows shorter. 

“Look, there are some big bright red lines on both sides. We do not have any of those issues closed out. And you've seen some folks that have indicated that some of these issues cannot be included. I'll tell you that that’s not what I'm operating under and that everything's on the table, and we're gonna keep negotiating until there's a deal that makes sense and meets the speaker’s parameters," he said.

Asked if there is general agreement on cuts, he said: “No, that's our biggest gap.”

Graves said that the biggest gap is about numbers. "My interpretation of their position is that they fail to recognize, or fail to accede to the fact that we are on a spending trajectory right now that is absolutely unsustainable.” 

While Republicans have said they want to keep as much of their debt ceiling bill intact as possible and hold on to as many Republican members as possible, he said they still have to take the Democratic-majority Senate and Democratic president into account. 

“Look, my objective is to get as many votes as we can, period. I think that's really important," the key GOP negotiator said.

2:00 p.m. ET, May 23, 2023

White House negotiators have left the Capitol

From CNN's Morgan Rimmer

Office of Management and Budget Director Shalanda Young speak at the White House in Washington DC, on May 4.
Office of Management and Budget Director Shalanda Young speak at the White House in Washington DC, on May 4. Demetrius Freeman/The Washington Post/Getty Images

White House negotiators have left the Capitol building, after meeting for a little over two hours with House Republican negotiators. 

Asked if they'd be back later tonight, Director of the Office of Management and Budget (OMB) Shalanda Young replied, "that's a good one."

1:56 p.m. ET, May 23, 2023

McCarthy: "We're not there yet," but debt ceiling deal is "always possible, I am optimistic"

From CNN's Nicky Robertson, Haley Talbot and Morgan Rimmer

House Speaker Kevin McCarthy speaks with other Republican members of the House and Senate at a news conference on debt limit negotiations at the Capitol in Washington, DC, on May 17.
House Speaker Kevin McCarthy speaks with other Republican members of the House and Senate at a news conference on debt limit negotiations at the Capitol in Washington, DC, on May 17. Haiyun Jiang/The New York Times/Redux

House Speaker Kevin McCarthy appeared optimistic about the possibility of a deal on the debt ceiling with President Joe Biden. 

“We’re not there yet,” McCarthy told reporters Tuesday afternoon. 

Asked if he thought that a deal — in principle — could be reached today, McCarthy responded, “Always possible, I am optimistic.” 

He added, "I believe in life you don’t give up … we are working together now, we are finally meeting." 

McCarthy has not spoken to Biden since their meeting Monday but said that the negotiating teams are getting together. He said that he is not scheduled to go to the White House today.

The speaker also said he would talk to Biden on the phone if they do not meet in person.

McCarthy reiterated his opposition to a spending freeze, a compromise that some Democrats are pushing for. 

“We are not putting anything on the floor that doesn’t spend less than we spent this year,” McCarthy said.

2:06 p.m. ET, May 23, 2023

McCarthy: Biden wants to disrupt negotiations over Medicare and Social Security

From CNN's Hill Team

House Speaker Kevin McCarthy now says he thinks President Joe Biden is trying to “disrupt” debt ceiling negotiations by bringing proposals involving Medicare and Social Security back on the table.

“The president said ‘You can’t do anything with Medicare and Social Security,’ and now he wants to bring that into the fold,” McCarthy said of a proposal that would help the government save money by expanding the number of drugs that Medicare can negotiate prices for, building on a provision in the Individual Retirement Accounts (IRA).

“We all heard that from all of the people across the country, over and over,” he said before interrupting himself to talk to tourists “and so now he wants to bring that in? That seems like a place to try and disrupt the whole negotiations. Like trying to throw taxes in, now trying to start talking about Medicare? No. We gotta get it done.”

McCarthy also said he wanted longer spending, saying that “the country would be in better shape” if they were extended out. 

“They’re working right now in the conference room there. We’re trying to make progress,” he said. “We’re hopeful that there’s progress.”

The White House has said cuts to Social Security and Medicare are off the table in debt ceiling negotiations. But they have long telegraphed an interest in expanding Medicare drug price negotiation, which would raise additional revenue by allowing the government to negotiate the prices of more prescription drugs.

More background: The Inflation Reduction Act, which congressional Democrats passed and Biden signed into law last summer, makes several changes to Medicare that are aimed at saving senior citizens and the federal government money. The most notable is allowing Medicare to use its heft to negotiate drug prices, a longstanding Democratic goal that had previously not been allowed.

The law empowers Medicare to negotiate the prices of certain costly medications administered in doctors’ offices or purchased at the pharmacy. The Health and Human Services secretary will negotiate the prices of 10 drugs in 2026, and another 15 drugs in 2027 and again in 2028. The number rises to 20 drugs a year for 2029 and beyond. Only medications that have been on the market for several years without competition are eligible.

The White House and many Democrats, however, have been eager to expand the number of drugs subject to negotiation and bring them into negotiation sooner after they launch. This would also save the government more money, allowing lawmakers to plow the funds into other programs.

One way Biden would use the savings is to shore up a key Medicare trust fund. The proposal, unveiled just ahead of his budget plan earlier this year, calls for allowing Medicare to negotiate even more prescription drugs and raising taxes on those earning more than $400,000 annually. This would extend the solvency of Medicare’s hospital insurance trust fund, known as Part A, by 25 years or more, according to the White House.

Medicare’s trust fund will only be able to pay scheduled benefits in full until 2031, according to its trustees’ most recent annual report. At that time, Medicare, which covered 65 million senior citizens and people with disabilities in 2022, will only be able to cover 89% of total scheduled benefits. 

It’s unclear what Biden is proposing for Social Security, which provides benefits to roughly 66 million people. Though Biden has promised to defend the entitlement from any cuts proposed by Republicans, his budget made no mention of it.

CNN's Tami Luhby and Jeremy Diamond contributed to this report.

12:47 p.m. ET, May 23, 2023

Key things to know about the debt ceiling as the threat of default looms

From CNN's Tami Luhby and Kaanita Iyer

Alberto Mier/CNN
Alberto Mier/CNN

The clock is ticking faster on the nation’s debt ceiling drama. Exactly when the federal government will no longer be able to pay its bills in full and on time is not known, but it could come as soon as early June.

That doesn’t give House Republicans and the White House a lot of time to work out a deal to avoid a default. Negotiators are trying to hammer out an agreement, but multiple sticking points remain.

House Speaker Kevin McCarthy pushed his package to raise the debt ceiling by $1.5 trillion through the House in a close vote in late April. But the White House is balking at some of the provisions, including deep spending cuts and additional work requirements for those receiving public assistance.

The US hit its debt ceiling in January, triggering the Treasury Department to start taking extraordinary measures to prevent a default.

Here are some key things to know about the situation:

What is the debt ceiling? Established by Congress, the debt ceiling is the maximum amount the federal government is able to borrow to finance obligations that lawmakers and presidents have already approved – since the government runs budget deficits and the revenue it collects is not sufficient. Increasing the cap does not authorize new spending commitments.

The debt ceiling, which currently stands at $31.4 trillion, was created more than a century ago and has been modified more than 100 times since World War II.

Though it was originally designed to make it easier for the federal government to borrow, the limit has become a way for Congress to restrict the growth of borrowing – turning it into a political football in recent decades.

Still, fears of a default have prompted lawmakers to pass legislation to raise or suspend the ceiling every time, most recently in December 2021. So the US has never actually defaulted on its debt.

What happens if the US does default on its debt? Once the extraordinary measures and cash on hand are exhausted, the debt ceiling crisis would start having very real impacts.

Treasury would likely have to temporarily delay payments or default on some of its commitments, potentially affecting interest and principal payments on US debt, Social Security payments, veterans’ benefits and federal employees’ salaries, among other obligations. But it might prioritize paying interest and principal first in an attempt to minimize the fallout.

No one knows exactly how Treasury would handle the situation since it has never happened. A default would also wreak havoc on the US economy and the global financial markets, as well as shake confidence in the safety of the Treasury market and raise borrowing costs. Even the threat of one in 2011 caused the only credit rating downgrade in the nation’s history.

12:16 p.m. ET, May 23, 2023

How a debt default could affect you

From CNN's Tami Luhby and Elisabeth Buchwald

A poster at a bus shelter shows the national debt in Washington, DC, on May 21.
A poster at a bus shelter shows the national debt in Washington, DC, on May 21. Mandel Ngan/AFP/Getty Images

President Joe Biden and House Republicans have a short amount of time to prevent the US from defaulting on its debt, which would impact millions of Americans and unleash economic and fiscal chaos here and around the world.

Treasury Secretary Janet Yellen has warned the government may not be able to pay all of its bills in full and on time as soon as June 1.

Here are just three ways that Americans could be affected by debt default:

Social Security payments: Payments to about 66 million retirees, disabled workers and others receive monthly Social Security benefits could be delayed in a debt default scenario, though it’s possible Treasury could continue making on-time payments because of the entitlement program’s trust fund, said Shai Akabas, director of economic policy at the Bipartisan Policy Center.

Almost two-thirds of beneficiaries rely on Social Security for half of their income, and for 40% of recipients, the payments constitute at least 90% of their income, according to the National Committee to Preserve Social Security and Medicare.

Other government payments could also be affected, including funding for food stamps; federal grants to states and municipalities for Medicaid, highways, education and other programs.

Federal employees and veterans benefits: More than 2 million federal civilian workers and around 1.4 million active-duty military members could see their paychecks delayed. Federal government contractors could also see a lag in payments, which could affect their ability to compensate their workers.

Also, certain veterans benefits, including disability payments and pensions for some low-income veterans and their surviving families, could be affected.

The economy: A debt default could trigger an economic downturn, which would prompt a spike in unemployment. It would come at a particularly fragile time — when the nation is already dealing with rising interest rates and stubbornly high inflation.

How much damage would be done would depend on how long the crisis continues. If the default lasts for about a week, then close to 1 million jobs would be lost, including in the financial sector, which would be hard hit by the stock market declines. Also, the unemployment rate would jump to about 5% and the economy would contract by nearly half a percent, according to Moody’s.

“It would be a body blow to the economy, and it would be a manufactured crisis,” said Bernard Yaros, an economist at Moody’s.

11:38 a.m. ET, May 23, 2023

Key GOP negotiators say talks are not going well

From CNN's Lauren Fox

House Speaker Kevin McCarthy and Rep. Patrick McHenry return to the Speaker's office after talking to reporters at the Capitol on May 22 in Washington, DC.
House Speaker Kevin McCarthy and Rep. Patrick McHenry return to the Speaker's office after talking to reporters at the Capitol on May 22 in Washington, DC. Chip Somodevilla/Getty Images

Republican negotiators Patrick McHenry and Garret Graves told reporters that negotiations are not going well at all and the White House needs to realize they have to agree to cut spending or no deal can be reached. It was a sober assessment that was in stark contrast to the rosier takes at the White House yesterday. 

"They have a tax crisis and they have a debt crisis," Graves said. "We're not going to be able to make this deal. We're not going to be able to move forward." The Republican claimed that Democrats "try to continue the same trajectory of overspending" and "overtaxing" while burdening the next generation with a "debt that absolutely they cannot afford and certainly didn't create."

McHenry once again said the "lack of urgency is apparent."

"The fundamental issue here is the spending," the Republican from North Carolina said. "The White House at the highest levels needs to understand the urgency of sending their team forward and making sure we understand we need spend less money next year, and everything else, everything else can come into zone." 

Asked what changed between the White House meeting yesterday and the staff meeting last night that caused him to sound so pessimistic, McHenry said: "I thought the White House meeting was reasonably productive. What we need is a team that is fully empowered by the White House to get the thing done. The White House still has this expectation that they can spend more money next year." 

When asked if Republicans would be willing to accept anything less than returning spending to full-year 2022 levels, McHenry responded: “Everybody's trying to figure out some way to shimmy this thing around. It's fundamental. You're spending less money next year than you're spending this year." 

Graves told reporters that as the negotiators deal with spending, they also have to be dealing with the reality of the other issues that have become part of these talks, including clawing back unspent Covid funds, new work requirements and other issues.

"I think that we need to address those issues first because then it gives us an idea of what type of gap we've got to address," the Republican from Louisiana said.